Bulgaria’s foreign investors are leading the charge to raise its investments in renewables and wean it off coal-powered electricity production, which still accounts for almost half of all power produced in the country. 

The transition from lignite to renewables will be supported by a strong nuclear component. This is Bulgaria’s second energy source and accounts for 35% of current energy production. 

Funds are being dedicated most actively to solar projects, and production of solar energy alone is forecast to grow from 1000 MW capacity to 3000 MW over the short term, said one leading investor. Wind projects are taking longer to complete owing to more extensive permitting requirements.

The country threw down the glove to foreign investors in 2022, when Bogdan Bogdanov, the then executive director of Invest Bulgaria Agency (IBA) urged investors via fDi to deliver 1.4 gigawatts (GW) of new renewables and 600 megawatts (MW) of battery storage by June 2026. Mr Bogdanov, subsequently became minister for economy and industry. 

A range of incentives from feed-in tariffs, long-term power purchase agreements (PPAs) and other financial incentives encourage the deployment of renewable energy technologies, says Emanuel Manov, a portfolio manager at Enery, an alternative energy producer. 

“Bulgaria’s abundant natural resources, strategic location and commitment to renewable energy development present a compelling case for investment in solar, wind, hydro and other forms of renewable energy,” he says.  

Investors will benefit from low labour costs and low corporate taxes, according to the US State Department’s “2023 Investment Climate Statement for Bulgaria”. Builders of photovoltaic plants can expect benefits included in the EU’s National Recovery and Resilience Facility.  

Labour shortages are a risk for investors, and these are likely to grow following Bulgaria’s admission to the Schengen area at the end of March 2024, similar to what is happening in Romania. 

Red tape and bureaucratic bottlenecks in planning need also to be taken into account, says Nikola Gazdov, a director of alternative energy company Enery. 

“Red tape has been partially removed. I wouldn’t say it’s brilliant, but it’s clearly better than five years ago or even two years ago. But still there are many hurdles and the process could be and should be streamlined further,” says Mr Gazdov, who also serves as chairman of the Association for Production, Storage and Trading of Electricity.

Foreign players

Among investors bringing renewable energy production to Bulgaria are Rezolv Energy, a Czech-based company, and Enery, an Austrian one. 

Rezolv’s 229MW St George solar project will become one of Bulgaria’s largest solar plants. Its 165-hectare site on a disused airfield on the Romanian border is strategically positioned. “Solar projects of this size require available land, good solar irradiation and capacity for grid access close to the site,” says Alastair Hammond, CEO of Rezolv. 

Rezolv’s single shareholder Actis, a large investor in the south-east European region, says its mission is to replace fossil fuel production with renewables and maximise the impact of emissions reduction. 

“St George is a utility-scale project. In Bulgaria, parks of this size are absolutely necessary to decarbonise an energy system which has historically relied on fossil fuels, but big projects always come with operational challenges. They are never entirely straightforward,” says Mr Hammond. 

Another block on projects between foreign investors and local firms buying energy from a foreign operator is caution when  agreeing to PPAs, warns Mr Hammond. “The PPA market is slower than we would like. Corporate off-takers [local companies buying power from the producer] are understandably cautious about signing a long-term contract directly with an energy producer when they haven’t done it before.” 

Such caution would abate with greater local familiarity, he says. “We all need to accept that decision-making will take time. It’s very important that we educate consumers to help them through this change in paradigm.”

This is confirmed by the experience of Enery, which acquired the 60MW Karadzhalovo Solar Park in Plovdiv by the Maritsa River in 2020 and has formed a PPA with local lead and zinc producer KCM to supply electricity for 12 years. 

“Local companies hesitate much more about getting into long-term agreements than companies in Western Europe because they are not that familiar with the concept of green energy supply. It takes time to educate them about green PPAs and gain their trust,” says Mr Manov of Enery. 

The company’s director, Mr Gazdov takes a more bullish approach to the PPA. “The PPA creates a more bankable project,” he says. 

Future in the balance

Bulgaria’s energy picture will be determined by the decisions of AES, a US-owned energy company, and ContourGlobal, a UK entity, which own and operate the Maritsa energy complex, the largest coal-fired power plant in south-eastern Europe. 

AES is set to decide whether to renew its off-take agreement with the state after it expires in 2025. AES says it has invested $1.6bn in Bulgaria’s power sector. 

“They may discontinue it, or they may change the business model to just providing reserve capacity for the colder part of the year or the winter months, when solar and wind might not be sufficient to provide energy cover,” says Mr Gazdov. 

ContourGlobal is maintaining its coal facilities at the Maritsa East Thermal Power Plant but is also looking for low-carbon investments. ContourGlobal’s owner, KKR, has a strong decarbonisation commitment, says Mr Gazdov. 

In December, the EU allocated €1.2bn under the Just Transition fund to support the country’s shift away from fossil fuels. 

Energy efficiency needs to be at the top of the government’s priority to reduce the amount of energy produced from fossil fuels and meet European energy goals, says Enery’s Mr Manov. 

The extent of Bulgaria’s imports of Russian hydrocarbons became a subject of pressing concern when the prices rose sharply after the fill-scale invasion of Ukraine. This has added further impetus to the quest to develop renewable sources.

“Bulgaria can decrease its dependence on imported energy while simultaneously reducing greenhouse gas emissions and mitigating climate change. The country needs to improve energy efficiency standards, promote energy-efficient technologies, and incentivise energy-saving practices,” Mr Manov says. 

The Center for the Study of Democracy (CSD), a Sofia-based think tank, takes an optimistic stance on Bulgaria’s energy outlook. The country was slow to embark on decarbonisation, but it now is on track to meet its 2030 National Energy and Climate Plan target set by the European Commission for solar power about seven years ahead of schedule, according to a CSD report.

Bulgaria could add between 3.8GW and 4.2GW of wind capacity by 2030, another 5GW by 2040, and offshore wind could add a further 150GW, said the CSD study. 

“Bulgaria needs to install huge amounts of solar and onshore wind capacity,” says Ruslan Stefanov, CSD’s chief economist. 

Foreign investment can play a major role in transforming Bulgaria’s renewable sector. The challenge for the country now is to ease the bottlenecks in development that will both attract the sums required to transform this energy sector and persuade policy-makers that the old stalwart of coal, to which Bulgaria has become so accustomed, is no longer the fuel that will either give it independence from foreign pressures or enable it to meet its environmental policy goals.

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This article first appeared in the April/May 2024 print edition of fDi Intelligence.